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No Such Thing As A Free Lunch ...

… or a profitable $999 42-inch flat-screen TV. Someone had to pay the price for those “Red Friday” deals, and the pricing schemes since then, and it seems to been many well-known retail chains.

Circuit City, Rex Stores, Tweeter, Harvey Electronics and CompUSA had challenges of varying degrees before healthy profits began to evaporate in flat panel, but it didn’t help. In the words of Circuit City chairman/president/CEO Phil Schoonover: “Flat-panel pricing declined a year faster” for the industry than anyone expected.

Best Buy has been riding a winning streak and building momentum since the late 1990s, with 2006 being another great year for the chain. 2007 looks good for them too, because Best Buy also has to come up with inventive strategies not to just sell price — in flat panel or anything else. Vice-chairman/CEO Brad Anderson said that even for his chain there are “turbulent waters to navigate now,” the closing of locations on the part of competitors will be “an opportunity later in the year to build share.” That can’t be comforting to competitors.

Mike Vitelli, senior VP of Best Buy, was in on the Best Buy analysts call and backed away from making any hard and fast predictions about flat-panel pricing this year. Schoonover commented that “vendors were not happy” during Circuit City’s conference call and that it could lead to “more rational behavior from the largest suppliers.” He added that the wild card could be the “96 suppliers selling in the U.S.” that by the end of the year will have different agendas.

As consumers begin to understand, accept and seem willing to spend more than $1000 for HDTVs of all types, one of the major technological achievements in CE history, profitability has severely dropped out of the picture. That’s sad.

During the coming weeks many of this industry’s manufacturers will report their fiscal year numbers.

We’ll see how much manufacturers paid for all those $999 42-inch flat panels.

Pardon the mixed metaphor, but as the old saying goes in CE, “You can’t eat market share,” even if it seemed like a free lunch at the time.